Quick Take
Lookout's July 31 housing forum featured a pair of panels with leaders weighing in from the political and development perspectives. The conversation brought to light challenges in financing a proposed tower in Santa Cruz, as well as the hurdles before the county in standing up affordable housing projects.
Last Wednesday night, Lookout posed a question to an expert panel of policymakers and a developer: “Can Santa Cruz control its housing destiny?”
With Santa Cruz County recently ranked again as the most unaffordable housing market in the United States, and the state senator leading an overhaul of California housing development policies among the people on stage, the question spurred a broad-ranging discussion and attracted more than 600 people to follow along both in person and on our livestream.
What I imagined was going to be a discussion primarily about local control evolved into one that laid out the disagreements and the challenges that define our housing predicament.
As is often the case with thorny policy issues, we didn’t come upon an answer, per se. However, the panel with state Sen. Scott Wiener, District 1 County Supervisor Manu Koenig and Santa Cruz City Councilmember Sandy Brown did offer competing perspectives, and some agreements, about how to solve the problem. The second panel, a one-on-one conversation with Workbench partner Sibley Simon, offered some breaking news, and insights on how money, rather than politics, is shaping what developments we see pop up in our community.
Here are five takeaways from the evening.
The Clocktower Center won’t likely rise to 16 stories, but not because of politics.
The big news of the evening came during the second panel, when Simon, a partner with Workbench, said he did not think a 16-story high-rise residential tower could get the funding necessary to build in Santa Cruz.
Simon reaffirmed and clarified his comments the following day, saying the public should expect to see a seven-to-eight-story version of Workbench’s Clocktower Center proposal. Simon said the financing side of the housing industry is extremely conservative, and the pockets behind new developments often want to invest only in proven visions.
“There’s a lot of not ‘I’m not going to be the first,’ in the development industry,” Simon said at the panel. “That’s probably why most of our buildings are done the same ways they were 100 years ago. Nobody is figuring out much new stuff.”
Construction costs are so high that even free land can’t make some projects viable
During the first panel, one of Koenig’s claims about the price of building new housing required a double take.
Koenig said a county analysis of three of its own vacant parcels showed that affordable housing projects would be financially infeasible because of the costs of construction. Asked later to clarify those comments, Koenig said the cost per square foot of housing construction is so high that the county couldn’t stand up a new affordable housing project on two of the properties, even if the county got rid of permitting fees and property taxes. The third, he said, could happen, but only if interest rates come down. Koenig did not say where the three properties are located.
“For God’s sake, if it doesn’t work on free land, where is it going to work?” Koenig said Wednesday night.
During the second panel, Simon said he wasn’t surprised to hear Koenig’s comments.
“Land is a pretty small part of the budget for a housing development project,” Simon said. “You know what’s typically bigger? The fees. Not even fees for work on that [specific] project, but just generally into funds for things we need.”
There is agreement that most people don’t care about local control, as long as housing is built.
The question of the evening, “Can Santa Cruz control its housing destiny?”, was about control over a community’s built environment, and whether the state or the city should have it.
When I asked this question at the beginning, Wiener said he didn’t believe that typical, everyday residents of a community cared who was making decisions about housing so long as it was available and affordable.
“It’s not relevant to most people’s lives whether it’s the state legislature, or the city council, or the county board of supervisors making this, that or the other decision,” Wiener said. “They just want to know that the job is getting done, and that we are doing what we, as human beings, have done since the beginning of time until about 50 years ago … which was: when you need more housing, you build more housing.”
Wiener’s comments got some agreeing head nods from his fellow panelists. Koenig did say the state could ease up on the added bureaucracy of its new laws, and Brown said a one-size-fits-all approach does not work for housing policy. However, neither argued against Wiener’s point that most residents don’t care who is in control of housing development decisions.
Wiener later defended the state’s efforts to take on more control over housing development.
“Local control is good … but when it doesn’t achieve good results, that’s when you have to look to a different approach, which is what we’ve done on housing,” Wiener said. “The upside of that is that you get more housing. The downside is that there will sometimes be projects that people will wish they could have sculpted as a city, a city council, as a planning commission. You have to pick a system, and this is the one we’ve chosen because of the complete housing disaster that we’re in.”
There is still disagreement on supply and demand’s impact local housing costs
Wiener called supply and demand a law, Brown called it a “theory.”
The logic that increasing supply will satiate demand and thus bring escalating housing costs down is behind the state’s effort to increase housing production throughout California.
Brown and others believe the economic model does not apply so cleanly to particularly in-demand housing markets such as Santa Cruz and other communities along the coastline. Brown pointed to the new studio units popping up in Santa Cruz that are going for $3,000 per month.
“I reject the idea that supply is going to produce increased affordability in our community, we are not seeing it happen,” Brown said to applause during the panel. “The state has applied a supply-side logic that just doesn’t work for all communities.”
Wiener said it took the state 50 years to dig itself into this hole, and it’s going to take more than a few years to begin seeing results.
“When you have a massive shortage and you start finally building, it’s not like that first tranche [of new housing] is going to solve the problem,” Wiener said. “It’s going to take time. The politics around that are hard, because what can do is say, ‘Hey look, the first tranche [of new housing] just got delivered and it’s still really expensive, so building it must not be the solution to the problem.’”
Housing mandates are a regional approach
The evening’s great reality check, I thought, came from Simon, when he put Santa Cruz County’s housing mandates into perspective. The county and its jurisdictions will need to build more than 10,000 new units over the next seven years, but the Bay Area and all of its cities need to build more than 300,000 new units.
Of course, the Bay Area, inclusive of Silicon Valley, has a much greater population and job center than Santa Cruz County or the Monterey Bay region. But Simon’s point was that the housing market is inter-regional, and more housing units in our surrounding regions could help to eventually bring down housing prices in our area as well.
“If that happens where … everyone is doing their fair share, that housing over the hill is going to make a bigger impact on slowing or stopping the rent growth than the housing we build here,” Simon said. “But everyone has to do their part.”
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